Economic expansions settle in high; China port reopens; China coal price leaps; China exports fade; EU momentum 'impressive'; UST 10yr 1.25%, oil and gold jump; NZ$1 = 69 USc; TWI-5 = 72.3

Here's our summary of key economic events overnight that affect New Zealand with news with some stress being relieved, but it building in other areas. Overall there is a recovery in risk appetites.

There were early August PMIs out everywhere overnight. These confirm that growth in developed economies is slowing from a strong pace. The renewed rise in virus numbers and staff and materials shortages also seem to be playing a role in the slowing expansions. The surveys suggest that price pressures are still strong, but they no longer seem to be intensifying.

The US factory PMIs are holding high, but their service PMIs are falling back to a much more modest expansion in August.

But for July, the widely-watched Chicago Fed's National Activity Index recorded a broad-based rise in economic activity in July.

In their housing market, they also reported an up-tick in sales activity in July. The median price rose +18% in the year to US$359,900 (NZ$521,600). They also reported that more houses are coming on to their market for sale.

In their financial markets, liquidity issues seem to be building and they weren't that good to start with. It isn't an unusual summer stress, but the ability of large institutions to trade without their activity moving markets is poorer now than a month ago, and something the Fed will be watching closely because it has the potential to cause market mayhem if it goes wrong.

In China, ships have started berthing again at the Ningbo container port south of Shanghai which may start the process of easing the global congestion it caused. (And China is no longer recording COVID cases and seems to have the outbreak there under control.)

But trading in iron ore yesterday to start the week wasn't a positive event with further falls, even if smaller than recently. But prices for other commodities are rising as shortages stalk their markets. There has been a huge jump in the cost of steel-making coal, for example, up +18% in one week.

China’s export growth, which hit a record high in the first six months, is cooling off sharply in the second half. And the situation could get worse next year, the country’s minister of commerce said yesterday. Chinese exporters are feeling the pinch from a wide range of cost and logistics factors, but a loss of confidence in the exposure of global supply chains to China is increasing taking a toll on them.

In Taiwan, their industrial production data remained very strong in July, mirroring yesterday's export data. But their retail trade is back in the doldrums, hurt by lock downs and pandemic closures.

There were also reports out yesterday for August factory PMIs in Australia and Japan - and both are contracting at faster rates, both with their recent expansion now in their rear-view mirrors. In both cases, the delta variant of the pandemic is doing the damage.

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In Europe, the overnight PMIs show them holding their recent "impressive momentum" (for them at least). Germany leads the way there.

The early version of their consumer sentiment survey for August also sees it holding at a healthy level.

In Australia, there were another 818 new community cases in NSW yesterday with another 698 not assigned to known clusters, so they are out of control. Their lockdown has been extended and they are now under curfew too. Victoria is reporting another 71 new cases yesterday, so it is surging there too and their lockdown is extended, also with a curfew. Queensland is reporting just 2 new cases in a bright spot. ACT has 16 new cases. Overall in Australia, more than 30% of eligible Aussies are fully vaccinated, plus 21% have now had one shot so far. But vaccine hesitancy is a growing issue there.

Wall Street has opened their week with a +1.0% rise for the S&P500 and following Tokyo's positive vibe yesterday. Earlier European markets rose about +0.5% with Paris leading (+1.0%) and London lagging (+0.3%). Yesterday, Tokyo ended with a very positive +1.8% rise, Hong Kong followed with its own +1.1% and Shanghai chimed in with +1.5% on the day. The ASX200 only managed a modest +0.4% rise yesterday, but the NZX50 got almost a full +1.0% gain.

The UST 10yr yield is down -1 bp today at 1.25% although earlier in the New York session it had risen to 1.28%. The US 2-10 rate curve is little-changed at +103 bps. Their 1-5 curve is a little flatter at under +71 bps, and their 3m-10 year curve is marginally steeper at +122 bps. The Australian Govt ten year benchmark rate starts today at 1.10% and +3 bp firmer. The China Govt ten year bond is at 2.89% and up +2 bps. And the New Zealand Govt ten year is now at 1.59% and little-changed.

The price of gold is much firmer today, up +US$24/oz in a day, and now at US$1805/oz.

Oil prices have leaped by +US$4, so in the US they are now just over US$65.50/bbl, while the international Brent price is just under US$68.50/bbl.

The Kiwi dollar opens today +½c firmer, recovering to 69.0 USc and to week-ago levels. Against the Australian dollar we are slightly softer at 95.6 AUc. Against the euro we are slightly firmer at 58.7 euro cents. That means our TWI-5 starts today at just over 72.3 and back in the 72-74 range of the past ten months.

The bitcoin price blipped up over US$50,000 again yesterday but is back below. Still from this time yesterday it has posted a gain and is now at US$49,434 which is up a minor +1.6%. Volatility in the past 24 hours has been moderate at just over +/- 2.3%. (A Chinese court has declared bitcoin "not money".)

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